Property Valuations and Capital Gains – Helpful Tips

July 14, 2016

You may think that capital gains tax is something you leave to your accountant or worry about at tax time – and you would be right. Capital Gain Tax can be costly without vital input from your accountant in conjunction with your valuer. To minimise your capital gains tax liability, we work with you and your accountant to provide you with the best outcome in relation to your property taxation liability.

In this blog, we clarify what capital gains tax is, howproperty valuation can influence your tax, and how you can minimise the amount of tax that you pay.

What Are Capital Gains Taxes and Stamp Duty?

Capital Gains Tax is the duty on the profit of an asset that you sell (or gift). So if you sell a commercial or residential investment or rental property you are obligated to pay tax on the profit that you made (assuming you made a profit). If you make a loss, there may be no tax for you to pay.

You may have noticed that we didn’t mention your home, and for good reason – your home is exempt from the Capital Gains Tax. There are further exceptions for the Capital Gains Tax (during a divorce etc.), which is why consulting an experienced property tax expert can save you so much money. For example, Capital Gains Tax is only payable on assets purchased after September 20, 1985, when the tax was introduced.

Stamp duty is different. While it is also a tax paid when selling or gifting a property, it is not a percentage of profit, but a rate that is calculated based on the market value of the property.

How Property Valuations Affect Your Capital Gains Tax and Stamp Duty

If you are selling a property that will incur Capital Gains Tax, you need a property valuation. Independent Property Valuations establish the value of your property at a particular date, which can then be used to calculate your potential or actual Capital Gains Tax and Stamp Duty liabilities. This allows you to take advantage of relevant exemptions to reduce your tax based on your accountants advice.

What You Can Do - Helpful Tips

If you are paying a Capital Gains Tax you should recognise it as a positive - if you weren’t paying the tax it would mean you had made a loss and had no gains to pay tax on. With that being said, if you are making a profit on your investment your intention would be to minimise tax payable. You have worked hard to develop your asset base and should maximise the return you receive from it. Here are some helpful tips to minimise your Capital Gains Tax: · Keeping your property for more than 12 months reduces the tax payable.

If you will have a low amount of taxable personal income, you are put into a lower tax bracket you could have a lower Capital Gains Tax when you sell.

Selling on July 1 as opposed to June 30 could delay the time of paying the tax by 12 months. This means you can earn interest on that money until it is due.

While you don’t have to sell on July 1, following the principle of selling early in the financial year can improve your financial position.

Putting the profit into your super account could reduce your taxes.

Do You Need a Valuation?

By choosing to work with IPV you are choosing a company willing to work with you and your tax specialist. We will team up with you accountant to minimise your tax liability, while maintaining our code of ethics and meeting the requirements of the Australian Valuers Institute and the Australian Property Institute.

Call us on 02 9659 5446 and deal directly with a valuer. Alternatively, get a quote today. We provide a guaranteed valuation turnaround time.

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